Ben Davis, Food and Agriculture Organization of the United Nations (FAO), September 2015
A commonly held view of cash transfers and other social protection programmes, in both developed and developing countries, is that they foster dependency. That is, poor families who receive financial support will work less and become lazy, leading to dependency on the transfer for their wellbeing. Many believe that the poor will spend the money on cigarettes and alcohol. In some countries of sub Saharan Africa such views among government officials have contributed to resistance to scaling up social protection programmes nationally.
It seems obvious that at some level a cash transfer might indeed induce dependency. If the government offered me 100% of my salary as part of a social protection programme I might be tempted to stop working and sit around and enjoy the good life—though you never know if they would keep the programme going in the next year, and what then? They would have to give me much more to induce me to give up my job.
Do we have evidence from the real world of cash transfer programmes in sub-Saharan Africa on whether these programmes foster dependency?
We do, and the answer is an emphatic no. They do not induce dependency.
Recent evidence produced by the From Protection to Production project, a joint effort of FAO and UNICEF, finds that cash transfer programmes in sub-Saharan Africa have big impacts on household livelihoods, particularly in terms of agricultural activities. Even among those beneficiaries that perhaps should work less — especially the elderly — they do not.
After two years of transfers, the Zambia Social Cash Transfer programme led to a 34 percent increase in land dedicated to crop production as well as an increase in the use of agricultural inputs, including seeds, fertilizers and hired labour. The growth in input use led to an approximately 50 percent increase in the value of overall production, which was primarily sold on the market. By improving livelihoods the cash transfer produced an income multiplier at the household level: the increase in per capita consumption induced by the programme was 25 percent greater than the transfer itself. It doesn’t seem that cash transfer beneficiaries in Zambia are becoming lazy!! Quite the contrary.
Similar impacts have been found in other countries. Also after two years, the Lesotho Cash Grant Programme increased crop input use and expenditures. As in Zambia, the increase in input use led to an increase in maize production, as well as in the frequency of garden plot harvests, an important contributor to nutrition. In Malawi the Social Cash Transfer Programme led to an increase in both maize and groundnut output.
In almost all programmes in which it was measured, cash transfers increased the ownership of livestock. And beneficiaries in Zambia, Malawi and Kenya were more likely to set up non-agricultural business enterprises, such as petty trade.
Along with the increase in productive activities, the cash transfers programmes have given households more flexibility with their time. In most countries of sub-Saharan Africa, low paying casual agricultural wage labour is an activity of last resort, when households are desperate for cash. In Zambia, women in beneficiary households reduced their participation in agricultural wage labour by 17-percentage points and 12 fewer days a year. Both men and women increased the time they spent on family agricultural and non-agricultural businesses. This story of shifting from agricultural wage labour of last resort to their own on-farm activities was consistently told in Kenya, Ghana, Lesotho, Malawi and Zimbabwe. As one elderly beneficiary said, “I used to be a slave to ganyu (low-paid wage labour) but now I am free.”
Cash transfer programmes also have allowed beneficiary households to better manage risk. Fieldwork in Kenya, Ghana, Lesotho, Zimbabwe, Ethiopia and Malawi has found that the programmes increased social capital and allowed beneficiaries to ’re-enter’ existing social networks and/or to strengthen informal social protection systems and risk-sharing arrangements. Receiving the transfer allowed beneficiaries to support other households or community institutions, such as the local church or mosque.
A reduction in negative risk coping strategies, such as begging or changing eating patterns, was seen in Malawi, Ethiopia and Lesotho, while beneficiary households in almost all countries were less likely to take their children out of school. The cash transfer programmes allowed households to be seen as more financially trustworthy, to reduce their debt levels and increase their creditworthiness.
And we see no evidence of increased spending on alcohol and cigarettes; in fact, in all cases receiving cash leads to an improvement in the quality and diversity of the foods people consume, and an increase in food security.
While we don’t see any evidence of laziness, these impacts on livelihoods and economic activities are not the same across all countries. Programme impacts are bigger — both for livelihoods as well as education, health and consumption — when transfers are regular and predictable, which allows households to plan their spending and smooth their consumption, essentially expanding their time horizon and letting them think about the future, instead of just daily survival. Transfer levels need to be big enough as well — between 20 and 30 percent of beneficiary income. But it is very unlikely they will ever get big enough to induce very poor and vulnerable families to stop working!